Unification Minister Ryoo Kihl-jae told lawmakers the government was aware of its conflicting policies, Yonhap news agency reported.
"Seoul is looking into the issue carefully," he said, "but public opinion is clearly divided on sanctions."
The sanctions, imposed in 2010, ban all commercial and personal transactions with North Korea except for a jointly run industrial park in Kaesong.
Ryoo conceded restrictions needed to be eased on travel to and from the park and new investments to make the park successful. As long as the ban is in place, he said, South Korean firms would be prohibited from investing in the park. International firms are not subject to the restrictions but they have not expressed interest in the park.
The minister said there were no immediate plans to lift any of the restrictions until Pyongyang apologized for its actions.
South Korean businessmen who met with lawmakers Wednesday said the industrial park is operating at only 50 percent of capacity rather than the 80 percent claimed by the government because of a lack of orders.
Rep. Jung Cheong-rae, citing a report by the private Hyundai Research Institute last week, said the sanctions had caused $88.4 million in direct losses to the South Korean economy. He claimed that was four times higher than the estimated losses for North Korea.